In the wake of rising health-care costs and constrained public budgets, understanding how efficiently countries convert spending into health outcomes is essential. This global analysis of 201 countries from 1995 to 2022 evaluates health-care inefficiency and its determinants using a new non-linear stochastic frontier meta-analysis method. By estimating the gap between actual and potential health-adjusted life expectancy (HALE), the study sheds light on the cost of inefficiency and the factors most closely associated with better or worse performance.
Measuring Inefficiency in Health Spending
The relationship between national health expenditure and HALE was modelled using a stochastic frontier meta-analysis approach. This model establishes an efficiency frontier—representing the highest achievable HALE for a given level of health spending. The inefficiency score quantifies the gap between a country's actual HALE and this frontier. Analysis revealed that inefficiency decreased steadily from 1995 to 2019, spiked during the COVID-19 pandemic and partially recovered by 2022.
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The cost of achieving one additional year of healthy life varies widely by spending level. For countries spending around €92 ($100) per capita, the cost per HALE year was €85 ($92). In contrast, for countries spending €4,600 ($5,000) per capita, the cost rose to over €10,325 ($11,000). These figures highlight diminishing returns at higher spending levels, where more investment yields smaller gains. For example, China achieved zero inefficiency in 2022, while countries such as Nauru and Equatorial Guinea had inefficiency scores above 12. Regional variation was also marked: southeast Asia, east Asia and Oceania showed the lowest inefficiency, while sub-Saharan Africa had the highest.
Factors Driving Efficiency Variations
A range of contextual and structural factors were evaluated for their association with inefficiency. Governance emerged as a key determinant. Countries with higher democracy indices, lower corruption and stronger rule of law exhibited significantly lower inefficiency scores. An increase in the democracy index was linked to a decrease of nearly one point in inefficiency, while higher education inequality was associated with greater inefficiency.
Financing mechanisms also influenced outcomes. A higher proportion of government health spending correlated with improved efficiency, while reliance on development assistance and its fragmentation were associated with worse outcomes. Among preventive care measures, vaccination rates, antenatal care and skilled birth attendance were consistently associated with lower inefficiency. Similarly, access to infrastructure such as electricity, roads and a dense health workforce was linked to improved efficiency. Electricity access had the strongest association, with a substantial decrease in inefficiency tied to improved coverage.
Implications for Policy and Future Research
This analysis underscores that countries can improve health outcomes without increasing spending by reducing inefficiency. For low-income countries, targeted investments in preventive care, infrastructure and governance could yield significant gains in HALE. For high-income countries, where further spending yields limited returns, the focus should shift to improving efficiency and technological innovation.
The pandemic highlighted vulnerabilities in health systems, temporarily reversing gains in efficiency. As countries recover, the lessons of 2020 and 2021 should guide more strategic investments, including better pandemic preparedness and strengthened governance. In addition, the study identified policy-leveraged areas where governments could reduce inefficiency, such as through more consolidated development aid, expanded insurance coverage and investments in social protection.
From 1995 to 2019, global health-care inefficiency saw marked improvements. Despite a setback during the COVID-19 pandemic, the overall trend remains positive. This comprehensive analysis demonstrates that inefficiency in health spending is not only measurable but also modifiable. Countries aiming to maximise health outcomes amid tight budgets should focus on strengthening governance, improving infrastructure and investing in preventive care. By narrowing the gap between actual and potential health outcomes, governments can achieve better value for money and enhance population health sustainably.
Source: The Lancet Global Health
Image Credit: iStock
